Substantial improvement in all relevant key ratios

Karlsruhe. The first three months of 2004 were characterised by a marked improvement in all relevant key figures compared to Q1 2003. This was the tenor of the quarterly report published by EnBW Energie Baden-Württemberg AG in Karlsruhe on May 14, 2004. Prof. Dr. Utz Claassen, CEO of EnBW, had already presented initial information to shareholders at the AGM of the Group on April 29, 2004. "With its first-ever quarterly report, EnBW has once again underlined its commitment to maximum transparency. Our company wants to serve as a model in terms of transparency, reporting detail and forecasting reliability vis-à-vis shareholders, the capital market and the public at large", said Prof. Dr. Utz Claassen, CEO of EnBW. He added that it was particularly pleasing that EnBW had been able to return to the black as early as Q1 2004 following the difficult losses in 2003 and the speedily implemented improvements to the cost structure of the company. In its core business area, EnBW succeeded in increasing sales by 7.8 percent from 2,501 million euros to 2,696 million euros. Overall sales remained unchanged from the first quarter of 2003 at 2,843 million euros.

As the special factors the Group had to absorb in financial 2003 and that led to a negative pre-tax result of -1.1 billion euros as at December 31, 2003 only became effective in the 2003 half-yearly accounts, the first quarters of 2003 and 2004 are directly comparable in terms of earnings. In Q1 2004, earnings before interest, tax, depreciation and amortisation (EBITDA) were 31 percent up on the corresponding period last year from 479.4 million euros to 626.9 million euros. All the business areas made a contribution to this improvement, headed in the core business field by the Electricity division with an EBITDA of 462.6 million euros. This EBITDA growth was driven by special factors as well as the optimisation of sales activities and systematic cost monitoring within the context of the TOP-FIT programme.

Earnings before interest and tax (EBIT) showed an improvement of 27 percent on the same period in 2003 from 268.1 million euros to 341.4 million euros. The highest absolute increase in EBIT was posted by the Gas division as a result of consolidation effects. The lower increase in EBIT compared to the growth in EBITDA resulted from the unscheduled goodwill amortisation of 80 million euros in the Electricity division and for the discontinued activities. Earnings before tax (EBT) almost doubled from 124.7 million euros in Q1 2003 to 243.8 million euros in the first quarter of 2004, making EBT in Q1 2004 the best quarterly figure at EnBW for five years. Post-tax earnings were also up by 273 percent in the first quarter of 2004 to a new total of 122.6 million euros. EnBW increased its net result by 67.3 million euros or just under 218 percent to 98.2 million euros. This was due in particular to the substantial improvement in earnings strength on the operating front and the increased financial earnings resulting from the lower interest rates.

Operating cash flow more than tripled from 69.3 million euros to 246.8 million euros, while investments fell by a total 68 million euros compared to the same quarter last year. EnBW made high investments primarily in the core business area of electricity (34.7 million euros). The focus of investment in tangible assets was on the expansion of power stations and distribution facilities. Free cash flow was up from -540.8 million euros in the first quarter of 2003 to 470.9 million euros in Q1 2004. "Our efforts to consolidate and restructure the company have succeeded in generating a markedly positive free cash flow. This is a major success and certainly one of the most important figures for this quarter", said Prof. Dr. Claassen.

EnBW also succeeded in reversing the negative trend in the equity ratio in the first quarter of 2004. This ratio, which was at 6.1 percent as at December 31, 2003, climbed back up to 7.2 percent by the end of March 2004. "Alongside the improvement in earnings strength, the reversal in the equity ratio trend, the retention of the A rating, the strict investment management policy and, in particular, the positive free cash flow generated in Q1 2004 are the highlights that show that our strategy is bearing fruit for EnBW", said Prof. Claassen.

Despite the signs of a turnaround, the EnBW boss emphasised that the encouraging result for the first quarter should be viewed with caution. He said that EnBW still had a lot to do to meet the targets set for 2006. Prof. Claassen: "We still have three tough quarters ahead of us this year. If our reorganisation, consolidation and restructuring strategy continues to be as successful as it has been during the past 12 months, however, then I am absolutely confident that we will also record a positive result at the end of financial 2004."